QDRO - Rollovers into and out of IRA's?

[Erik Read]

Can anyone provide cites or tax code reference that shows that distributions to a spouse via a DRO, rolled into a "Traditional IRA" not a "Conduit IRA" can be rolled back into another qualified plan as long as the "TIRA" never had other assets?

Next - is there a cite that says it cannot be done?

Suggestions? We have a client who will be recieving a distribution from her now ex-husband but would like to roll it into her existing 401(k) - can this be done via a QDRO distribution?

[Guest xplan]

An alternate payee who is a spouse/former spouse of the participant is afforded the same rollover options as if they were an actual participant under the plan. You may want to review IRC 401(e)(1)(B) and Treasury Reg 1.402©-2, Q&A 12(a).

[Guest xplan]

I mistyped the IRC section. It is 402(e)(1)(B).

[Erik Read]

Great - thanks for the cite.

Next question is - since the spouse is eligible - we've established that, what about the Trad IRA vs. the Conduit IRA situation?

Our Broker/Dealer - clearing firm, states that QDRO distributions must go into a Trad IRA, and my understanding is that once assets have gone into a Trad, they are no longer eligible to roll into another qualified plan - at least not without a lot of paper trail to show that no after-tax assets were contributed to the IRA.

[Guest xplan]

Assets paid and rolled into an IRA can only be moved into another qualified retirement plan if they come from a conduit IRA. The BD is correct that it must be a traditional IRA in order to accomplish this. The traditional IRA becomes a conduit IRA, as long as no other assets of the alternate payee are mixed with it. Once the QDRO payout is mixed with personal assets of a traditional IRA, the portability of those assets to another qualified retirement plan stops.

[Erik Read]

Thanks - that's the confirmation we were looking for. I think we also had some "symantic" situations. The tax code referres to a "traditional" IRA, which as you stated is either a contributory or conduit IRA, our B/D considers a "Traditional" IRA to be a contributory one, and a "Conduit" IRA as just that. So, in this world - misconception is the root of all evil.

Thanks again!